For the first time since 2006 the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac will increase. The Federal Housing Finance Agency announced the news that these limits will be raised in 2017 in a November 23, 2016 press release that laid out the new limits and the reasoning behind the increase.
A baseline loan limit of $417,000 has been in effect since it was put into place by the Housing and Economic Recovery Act of 2008. Though the limit was to be adjusted each year based on current home prices, a decline in real estate value during the housing crisis meant that loan limits remained unchanged for many years.
The House Price Index for the third quarter of 2016 which was released on the same day, revealed that average home prices have risen above where they were in the third quarter of 2007 before real estate prices began to decline. The loan amount increase will be dictated by how far above that level the House Price Index has moved. At this point that number is about 1.7 percent, and the maximum loan limit will increase by that percentage as well.
New Limit Amounts
The new baseline maximum conforming loan limit will increase to $424,000. The limits for high-cost areas, where 115 percent of the local median home value is greater than the baseline limit, will go up as well. In these locations, determined on a county by county basis, the loan limit can go as high as $636,150, which is 150 percent of the baseline amount.
The loan limits for properties in Alaska, Hawaii, Guam, and the US Virgin Islands can be even higher, with the baseline limit in these areas set at $636,150, and some locations within them above that number. The limits are also higher for two, three, and four unit properties.
Higher conforming loan limits may create opportunity for both buyers and industry professionals. Home shoppers looking to avoid jumbo mortgage financing can now expand their price range slightly, which can make a difference in areas with tight inventory and sellers not willing to move much below asking.
AFR has an extensive selection of conforming loan products to help you serve your clients well. Learn more by calling 866-372-6596 or exploring our programs >>
Photography by [Melpomene] © shutterstock.com
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